Tuesday, September 24, 2013

"Government policies on Real Estate sector to add on to rise in property prices by 20-25% - Says NAREDCO"

Government policies on Real Estate sector to add on to rise in property prices by 20-25% - Says NAREDCO

MUMBAI, 23 September 2013: The recent changes in the government policies is expected to hit hard the common man who wish to have a shelter on his head. ‘’ The 'Land Acquisition bill' passed by the parliament followed by 25 basis point hike in Repo Rate by Reserve Bank of India will lead to 20-25% increase in the property prices, says Mr Sunil Mantri, Vice President of National Real Estate Development Council (NAREDCO).

The deepening economic slowdown, rising cost of living and low wage revisions, coupled with higher interest rates, have forced the common man to rethink on his decision of owning his dream home. The recent announcement by RBI on increasing Repo rate by 25basis point has taken its toll on salaried professionals who are finding it difficult to apply for home loans in the tight market scenario.  This coupled with the 'Land Acquisition bill' passed by the parliament will ensure property prices increase by 20-25% in the coming years Mr Mantri added.

The land acquisition bill passed by the parliament, proposes that farmers and landowners be paid up to four times the market value for land acquired in rural areas, and two times the market value in urban areas. Reacting on the bill Mr Mantri said "It is not a good development for the real estate industry, as this policy is going to increase the land cost significantly, impacting project costs and thus leading to rise in housing prices. “ If we see today the land valuations are already high, and land acquisition bill would further increase the valuation, making land acquisition difficult. Also the rise in interest rates will increase the cost of capital for the developer and for the buyer, making it a double burden on the end user as the developer also has to pass on the cost to the end user,” he pointed out.

Mr Mantri further said  "It would impact several sectors and by bringing private negotiations for land under the government ambit, it would lead to several hurdles to buy land and increase procedural delays. Thus the affordable housing' projects would not be affordable anymore."

Adding further Mr. Navin Raheja, President, Naredco said " The steps taken in the monetary policy in current business scenario will further add problems to all sectors related to real estate business. All industries including real estate are struggling and facing huge liquidity crunch, high input costs and slow sales. Higher repo rates will again lead to increase in borrowing cost and will result into further rise in input cost. We were expecting that the RBI will not change the repo rate and will take measures to increase the liquidity in the market by reducing CRR and other necessary measures. But no such step has been taken”.  

Commenting  on Land Acquisition Bill Mr Mantri pointed out that " The new land acquisition bill is expected to adversely affect the development of large real estate projects, infrastructural projects and industrial developments. The cost of land will go up and the time taken for acquiring such land will also get prolonged as rehabilitation and resettlement (R and R) policy will be applicable in case of land acquisition of 50 acres in urban areas and 100 acres in rural areas. The private developer who is buying a land through direct negotiations from farmers will also go through the entire land acquisition process.

He further commented that "In most parts of the country, the private developers acquire land at mutually negotiated market price with 100 percent consent of the land owners. Additional financial  burden of R and R component will increase the cost of land. In our opinion the bill should exclude the privately , mutually negotiated transaction from preview of the bill as R and R provisions on larger land acquisitions will adversely affect the real estate development in the country."

"NAREDCO has been strongly appealing to the Government for creating policies that would support affordable housing in the metro cities, such policies hinder the very purpose of ensuring that the citizens are given the opportunity to own their own dream house" mentioned Mr Raheja.

Mr Mantri further added that the Government should seriously look into waving off extra taxes like stamp duty, excise duty, VAT, service Tax, registration charges etc to achieve the dream of owning a house within Rs 25,00,000 in cities like Mumbai and Delhi

Mr Raheja was part of the panel of delegation that had proposed Affordable Housing Policy 2013, which is intended to encourage the planning and completion of 'Group Housing Projects’ to ensure increased supply of 'Affordable Housing' in urban housing market.

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